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Inside SodaStream's West Bank Factory

By Isaac Pino, CPA - Jul 4, 2014 at 9:13AM

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A new short film offers a look at the day-to-day work performed in SodaStream's West Bank facility.

SodaStream (SODA) has 22 manufacturing plants around the world, but only one of them is located near a center of intense cultural conflict. It's a factory where workers from both Israel and Palestine assemble SodaStream machines side by side, and it sits squarely in an occupied West Bank settlement known as Ma'ale Adumim.

Political unrest in the surrounding region poses risks for SodaStream, but investors in the company can only assess that risk based on management's discussions or news reports that often carry a significant bias. What investors would like is an unvarnished glimpse into the work-life at this particular operation, and that's where a new documentary called The Factory: Inside the Israeli Occupation will serve them well.

Produced by The Verge website and Stateless Media, the film explores SodaStream's Ma'ale Adumim site from multiple angles. It's a story of trade-offs for Palestinian workers, of livelihoods at stake, and of a company caught in the middle. It's well done, but not completely untainted, since workers admit that SodaStream hand-selected specific employees for interview. Nevertheless, its definitely worth a watch for shareholders.

With the permission of Stateless Media, we have embedded the YouTube version of the film at the end of this article. To provide context, here are a few key aspects of SodaStream's West Bank dilemma to date:

The background: Over the past few years, SodaStream's faced periodic boycotts around the world and intense scrutiny over the factory and its workers. In January, the controversy crept into the media spotlight when the company selected Scarlett Johansson as its celebrity spokesperson. The actress's ties to Oxfam, a human rights group, presented a conflict of interest, and ultimately Johansson cut ties with Oxfam amid mounting criticism. Since then, SodaStream's operational issues and fresh competition have pushed the story to the back burner, but it manages to make waves every now and again.

The demographic profile: Of the roughly 1,300 people employed at the factory, 500 are Palestinian from the Occupied West Bank and East Jerusalem, 450 are Arab citizens of Israel, and 350 are Jewish Israeli.

The land issue: Controversy stems over the fact that the factory sits on a hotly contested, but currently Israeli-controlled, piece of land. Therefore, SodaStream -- an Israeli company -- does not pay taxes in Palestine or contribute to its economy in the manner of a Palestine-based operation. 

The manufacturing mix: In the same industrial park in which SodaStream operates, there are roughly 300 factories, most of which are owned by Israelis. Opponents of SodaStream claim that tax incentives and government support actually work in SodaStream's favor in this locale.

The employment issue: Activists have raised concerns about the fairness of Palestine workers' rights and wages. At the same time, some Palestinian workers (including the primary character in the film) attest to earning higher pay than they otherwise would with a job at a Palestinian company. The workers' rights issue, including legal representation and the sort, is left unaddressed by the documentary.

The company's comments: SodaStream CEO Daniel Birnbaum has remarked that his company can be "a model for peace" between Israelis and Palestinians. He's not overly concerned with a potential widespread boycott, stating, "If eventually there was a boycott, I don't really care that much from a SodaStream standpoint, we'd just shift production to a different factory." According to management, SodaStream prefers to keep the factory open to avoid harmful layoffs.

SodaStream's sensitive subject
Onlookers might be wondering whether preserving jobs for just more than 1,000 employees is worth the backlash for SodaStream from the Palestinian state and its supporters. In fact, it seems as though SodaStream, in particular, has been singled out on this issue due to its brand visibility, and its status as a significant exporter in the region.

Furthermore, as Slate's Matthew Yglesias points out, even though some employees benefit from SodaStream's current West Bank operations -- Palestinians included -- the opposing argument revolves around an imbalanced democracy... at least from his perspective. Thus, it's difficult to trumpet the virtues of 1,300 jobs in that broader context.

But the situation, as you can tell, is chock-full of complexity. And SodaStream, in a perfect world, would much rather focus its energies on maintaining its position as the world's leading at-home soda company. In the future, as my colleague Blake Bos has suggested, that might be a possibility. SodaStream is currently erecting a factory in southern Israel that's three times the size of all existing operations. Odds are the company could relocate all of its assembly to the new facility, though management has not yet stated whether that will occur.

For now, investors in SodaStream must continue to evaluate the risk posed by its West Bank operations, and draw their own conclusions. As a fellow shareholder, I highly recommend watching The Verge's video and reading the accompanying article for insight into the treatment of SodaStream's most valuable asset -- its employees.

Isaac Pino, CPA, owns shares of SodaStream. The Motley Fool recommends and owns shares of SodaStream. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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